ISRAEL AND CHINA QUIETLY FORM TRADE BONDS

By THOMAS L. FRIEDMAN

Published: July 22, 1985

JERUSALEM, July 21—
While reports surfaced last week about secret exchanges between Israel and the Soviet Union, a far more intense and lucrative relationship has been quietly developing between Israel and China, according to Israeli officials.

The Chinese in the last seven months have shown an increasing appetite for Israeli skills in agriculture, solar energy, manufacturing, advanced technology, robotics, construction, road building and arms manufacturing, say Israeli officials familiar with the trade. Some deals have already been struck and many others are pending at one stage or another, according to recent Israeli press accounts.

Chinese Drive for Development

The Chinese interest in Israel - a country with which Peking has not had diplomatic relations and whose policies it regularly denounces in international forums - is seen by Israeli experts as one more manifestation of China's new economic policy, which is aimed at achieving rapid industrial development by adopting Western methods and technology from any country willing to sell it.

The extent to which the Chinese have been willing to develop economic ties with Israel despite the absence of diplomatic relations was demonstrated just a few weeks ago, Israeli officials said. In the past, virtually all Israeli academics or businessmen who wanted to visit China had to hold dual citizenship, so they could travel on the passport of a country with which China had diplomatic ties, such as the United States. The Chinese would not issue visas to holders of Israeli passports.

New Precedent Reported

But according to Israeli Government sources, a delegation of nine representatives from various Israeli industries - most of them owned by collective farms - visited China at the end of May and early June at the invitation of the Chinese authorities.

These Israelis, Government sources said, were given visas on official Israeli passports, and their delegation was led by Shmuel Pohoryles, director of the Israeli Ministry of Agriculture's Joint Agricultural Planning and Rural Development Authority.

''The fact that Israelis entered China without having to hide their identity is a major step forward for us,'' a senior Israeli official said.

'I Don't Know Anything'

Asked to comment on the trip, a spokesman for the Ministry of Agriculture said: ''I never heard of the thing. I don't know anything about it. This fellow won't talk to you about it. You can interpret that any way you want.''

The Israeli Foreign Ministry has been equally tight-lipped on the subject. A routine request by a reporter to meet with the senior Foreign Ministry official dealing with economic relations in the Far East was turned down.

But one very senior Israeli official, speaking only on the condition that he not be identified, said: ''The Chinese know that we have developed systems, in agriculture and irrigation for instance, which they are very interested in acquiring. Israeli businessmen are trying to expand relations. We were one of the first nations to recognize China and we are very interested in reaching better relations, politically and economically. We have never had any reason for hostility. On the contrary, we are two ancient peoples.''

Now, in order to facilitate Israeli-Chinese economic relations, the Israeli Foreign Ministry has decided to reopen its consulate in Hong Kong in the next few weeks. The consulate was closed in 1975 because of budgetary cuts and an absence of contacts with China.

Israeli officials say the Hong Kong consulate will be used as the main point for diplomatic and economic contacts between Israel and China.

Last week there were reports of secret contacts with the Soviet Union in which, according to the Israeli radio, the Russians proposed an arrangement under which diplomatic relations with Moscow might be restored.

Israeli officials have no illusions that the Chinese, who have thousands of workers in the Arab world, will recognize Israel in the near future. But they hold out the hope that they could have the kind of relationship with China that it has with the many African nations that do not formally recognize Israel but nonetheless maintain covert diplomatic contacts and engage in trade.

New Consul Is Designated

Israel has said its new consul in Hong Kong will be Reuven Merhav, a highly respected former head of the short-lived Israeli diplomatic mission in East Beirut and a man with experience in sensitive assignments such as in Iran. Mr. Merhav is to take up his post in the next two weeks.

Even in the absence of an Israeli consul in Hong Kong, Chinese and Israeli businessmen have had no problem making contact.

According to a report several weeks ago in an Israeli political weekly, Koteret Rashit, the basic thrust of which has been confirmed by Israeli officials, Chinese provinces and economic development companies have submitted more than 70 project proposals to Israeli companies since last December. The projects range from the construction of residential neighborhoods to the export of high-technology hardware. The original go-betweens were Jewish businessmen working out of Peking, Hong Kong, Europe and Australia, but now the Chinese are said to be increasingly approaching Israeli companies directly.

'Hungry for Know-How'

''The Chinese are hungry for know-how, ideas and investments and are prepared to buy anything under the right economic terms,'' said Koteret Rashit. ''Information on such projects is transferred from China to Israel on facsimile machines. Among the contracts already signed: an agreement to build multistory hotels, a project to build a big civilian airport in southern China in partnership with some other Western companies, a contract to establish a chemical products plant for agriculture in southern China, a contract to provide know-how concerning fish processing and a joint advertising project with Chinese advertisers.''

The companies involved would not allow their names to be used for fear that the publicity would lead to a break in the deals. But given the volume of business that is being discussed and the number of Israeli engineers expected to go to China soon, it seems unlikely that the subject could be kept secret much longer.

Image of Technological Success

Israeli experts on China said there were several reasons why China had become interested in wider dealings with Israel.

''Israel has the image in China of a small country that has been very successful in technology, particularly in irrigation systems and the development of arid zones,'' said Prof. Harold Z. Schiffrin, a China scholar and director of the Harry S. Truman Research Institute at the Hebrew University, who has visited China three times since 1982 on his American passport. ''From Israel, they can get the best technology at the best price.''

Professor Schiffrin also said the Chinese have been trying to modernize their military systems and are looking for state-of-the-art technology that is unavailable to them from either the United States or the Soviet Union.

Several reports have surfaced in the last year that Israel has already sold China millions of dollars worth of military equipment, something Israeli officials deny perfunctorily and without much enthusiasm. The most persistent report, in the Japanese newspaper Sankei Shimbun in January, is that China's new T-69 medium tanks were equipped with British 106-millimeter guns made in Israel under license.